Before the Year of Assessment (YA) 2005, non-trade income (rental, interest, dividend income) of sole-proprietorships is assessed on a calendar year basis. With effect from the YA 2005, if your sole-proprietorship business prepares accounts to a date other than 31 Dec, you may choose for the non-trade income of your sole-proprietorship to be taxed on an accounting year basis, in the same basis as your trade income is taxed.
However, you cannot apply the above treatment to Singapore franked dividend income if your sole-proprietorship business derives Singapore franked dividend income before 01 Jan 2008. In other words, Singapore franked dividends derived before 01 Jan 2008 shall continue to be assessed on the calendar year basis.
In line with the new treatment from YA 2005, you may also claim a tax deduction for approved donations made in the name of the sole-proprietorship on an accounting year basis.
Application of the Revised Tax Treatment to Sole-proprietors
Even if you apply the above revised tax treatment to the non-trade income of your sole-proprietorship, more than one basis of assessment could still be applicable to you. Your trade income and non-trade income derived through your sole-proprietorship will be taxed on an accounting year basis. However, your other non-trade income will be taxed on a calendar year basis.
To further explain, if your sole-proprietorship business prepares accounts to a date other than 31 Dec, your trade income will be taxed on an accounting year basis. You may also choose that your non-trade income that is related to the carrying on of the sole-proprietorship business (i.e. derived solely from the assets of the sole-proprietorship) to be taxed on an accounting year basis.
However, your other sources of income not derived from the assets of the sole-proprietorship will continue to be taxed on a calendar year basis.